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Stay in the know with the EnerKnol Pulse, our weekly roundup of energy policy news powered by the EnerKnol Platform. In this edition, the Federal Energy Regulatory Commission tosses PJM's plan to tackle subsidies in wholesale markets, Commissioner Powelson resigns just as big policy decisions on pipelines and climate change loom large, Enbridge gets the go-ahead for its $7-billion oil line, and much more. Tell us what you think at research@enerknol.com

July 2, 2018


Featured Topics

Greening Energy Mix

Rates and Power Markets

Modernizing the Grid

Fuels and Pipelines


Featured Entities

AEP

Ameren

American Petroleum Institute

Astral Energy

Dominion Energy

Edison Electric Institute

Enbridge

ERCOT

FirstEnergy

Hanwha Group

IDACORP

Idaho Power

Invenergy

ISO-NE

National Corn Growers Association

National Grid

Navigant

PJM

Santee Cooper

SCANA

SoCal Edison

SWEPCO

Terra-Gen Power

WEC Energy Group

WPPI Energy

Xcel Energy

174 Power Global

Top News

FERC Rejects PJM’s Proposals to Tackle State-Backed Generation, With Dissent from Democratic Commissioners

The Federal Energy Regulatory Commission on June 29 rejected the dueling proposals – capacity repricing and MOPR-Ex – that PJM Interconnection LLC filed in April designed to address the suppression of prices in its markets arising from growing amounts of subsidized generation. The commission proposed an alternative approach under which PJM would expand its minimum offer price rule, or MOPR, which currently applies to new natural-gas fired resources, to all sponsored resources regardless of resource type with “few to no exemptions,” and also establish a “fixed resource requirement alternative” mechanism, allowing subsidized resources to be removed from the capacity auction. Commissioner Cheryl LaFleur dissented saying she would have preferred to refine the MOPR-Ex concept rather than reject it. Commissioner Richard Glick also dissented saying that the move interferes with states’ jurisdiction over generation facilities and the commission fails to prove that the PJM market is unjust. Comments on the proposal are due in 60 days, with reply comments 30 days after that. The commission expects to issue a final ruling by Jan. 4, 2019.

FERC Commissioner Powelson to Resign as Agency Grapples with Contentious Pipeline Policy, Resiliency

Federal Energy Regulatory Commissioner Robert Powelson, a Republican, announced that he will step down mid-August to become president and CEO of the National Association of Water Companies, a trade group of private water utilities, according to a June 28 statement. The resignation comes at a time when the commission has opened major dockets including a review of the 1999 gas pipeline policy and grid resiliency. Powelson wielded the swing vote in recent decisions on new gas pipeline approvals, so his departures will leave a partisan split at the commission. Powelson has also defended competitive markets, opposing efforts by the Trump administration to prop up money-losing coal and nuclear plants.

Minnesota Regulator Greenlights Enbridge's Controversial Line 3 Oil Pipeline Project, Including Preferred Route

The Minnesota Public Utilities Commission on June 28 approved Enbridge Inc.’s approximately $7-billion Line 3 replacement project, including the company’s preferred route with modifications and conditions, according to the company’s press release. The ruling comes over the recommendations of administrative law judge Ann O’Reilly who in April called for approval of an “in trench” replacement requiring Enbridge to remove the existing line and build a new one in the same path to minimize environmental impacts that would arise from creating a new corridor. The decision also deals a blow to environmental groups who oppose the line because it will increase the flow of carbon-intensive tar sands crude oil from Canada to U.S. refineries and because it will threaten the state’s water bodies. The project entails replacement of Enbridge’s aging and deteriorating 50-year old pipeline, which spans over 1,000 miles to deliver crude oil from Alberta, Canada, to refineries in the Midwest and beyond.

South Carolina Passes Bill to Cut Customer Payments Tied to Failed Nuclear Plant, Threatening Merger

The South Carolina legislature approved a bill on June 27 that would reduce South Carolina Electric & Gas Co. customers’ payments toward the failed V.C. Summer nuclear project until state regulators make a final decision on how to address the nuclear-related debt. SCANA subsidiary South Carolina Electric & Gas and state-owned utility Santee Cooper scrapped the expansion project last July after spending about $9 billion. The move deals a setback to Dominion Energy Inc.’s offer to buy SCANA, which hinges on continuing cost recovery through rates under the Base Load Review Act. Dominion Energy called the move “short-sighted,” saying that legislators are risking payments of $1.3 billion to customers and a permanent rate reduction of 7 percent. (H. 4375, S.954)

Greening Energy Mix

New Jersey Begins Process to Phase Out Solar Credit Program in Transition to New Distributed Solar Regime

The New Jersey Board of Public Utilities has approved a rule to start the process of closing the Solar Renewable Energy Credit program following legislation enacted in May, according to a June 22 press release. The legislation requires the board to stop accepting applications under the program once electric sales from distributed solar reaches 5.1 percent, and set a June 1, 2021 deadline to close the program. The board said it will soon begin a study to come up with an alternative program and create an orderly transition method to ensure continued growth and investment in solar. The state has a goal to get 50 percent of its energy from renewables by 2030.

Missouri Regulator Approves Ameren Settlement to Implement Wind Energy Subscription Program

Missouri Public Service Commission approved a settlement allowing Union Electric Company to create a Renewable Choice Program or Green Tariff Program designed to provide wind energy subscriptions to customers with a demand of 2.5 megawatts or greater and to cities, towns, and villages, according to the commission’s June 27 order. Customers would get renewable energy credits associated with the subscriptions. The company said it intends to obtain wind energy from projects that qualify for the federal production tax credit. Union Electric is a subsidiary of Ameren Corporation.

U.S. Interior Department Clears Wyoming’s First Large-Scale Solar Project

The U.S. Interior Department’s land management bureau approved Sweetwater Solar LLC to construct an 80-megawatt solar photovoltaic facility spanning about 700 acres in Sweetwater County, Wyoming, according to the bureau’s June 26 press release. The developer has a 20-year power purchase agreement with PacifiCorp to sell the output. Construction is set to begin July 1 with an expected in-service date of February 2019. Sweetwater Solar is a subsidiary of California-based 174 Power Global Corporation, an affiliate of Hanwha Group.

Terra-Gen Power Subsidiary Gains Operational Control of Interests in 150-Megawatt Wind Facilities

The Federal Energy Regulatory Commission on June 28 authorized a transaction allowing Three Wind Investments LLC to convert its interest in Cabazon Wind Partners LLC, Rock River I LLC, and Whitewater Hill Wind Partners LLC from non-managing to managing interest. Three Wind Investments currently has limited rights needed to protect its investment, but post-transaction rights will enable management and control of day-to-day operations. Three Water Investments and Shell WindEnergy Inc. have 50 percent ownership interest each in Three Wind Holdings LLC, the direct parent company of Cabazon, Rock River, and Whitewater. Cabazon and Whitewater own wind farms with capacities of 41 megawatts and 61.5 megawatts, respectively, in California, while Rock River owns a 50-megawatt wind farm in Wyoming. Three Wind Investments is a subsidiary of Terra-Gen Power LLC, which in turn is a subsidiary of ECP ControlCo LLC, a firm controlled by six individuals.

WEC Energy Group to Invest $148 Million in 132-Megawatt Illinois Wind Project

WEC Energy Group Inc. has entered into an agreement to gain an 80 percent stake in the Bishop Hill III Wind Energy Center in Illinois, according to the company’s June 28 press release. The project, developed by Invenergy LLC, has a 22-year offtake agreement for its output with WPPI Energy, a Wisconsin-based non-for-profit that serves member utilities in Wisconsin, Michigan, and Iowa. Under the federal tax overhaul, WEC Energy is expected to qualify for 100 percent bonus depreciation and production tax credits. The transaction must receive approval from the Federal Energy Regulatory Commission.

Customer-Owned Renewables in Florida Rose Over 50 Percent in 2017: PSC

The amount of customer-owned renewable generation jumped by just over 50 percent last year from the year before, while the number of household systems connected to the grid reached over 24,000 from about 16,000, according to the commission’s June 29 press release. Statewide renewable electricity generation rose by 46 percent over the same period. Customer-owned systems have grown steadily since 2008 when net metering rules were established allowing customers to get credited for excess generation. The commission attributed the progress to the effectiveness of its policies to “prime the pump” for solar panels.

Rates and Power Markets

Xcel Energy to Pass Federal Tax Cut Savings to South Dakota Customers, Agrees to Two-Year Rate Freeze

Northern States Power Company agreed to refund $10.8 million to customers to pass on savings from the federal tax overhaul, according to a settlement filed with the South Dakota Public Utilities Commission on June 25. The refund, based on rates in effect in 2018, would be made in a single payment by August or on a commission-determined schedule. Instead of making additional tax-related refunds beyond 2018, the utility agreed to a rate moratorium to avoid base rate increases for the next two years. Rates would be adjusted to reflect tax impacts in the next rate case which may not be filed until June 2020 so that new rates may not take effect before January 1, 2021. The Trump administration enacted legislation that slashed the corporate income tax rate to 21 percent from 35 percent, effective Jan. 1. Northern States Power is a subsidiary of Xcel Energy Inc.

Texas Grid Operator Faced With 2-Gigawatt Capacity Shortfall to Meet Peak Demand This Summer: EIA

The Electric Reliability Council of Texas Inc. is the only region in the North American Electric Reliability Corporation’s summer reliability assessment to have a lower anticipated reserve margin – unused generating capacity available as a buffer during peak demand hours – than its planning reference margin this summer, according to a June 29 report from the U.S. Energy Information Administration. The grid operator expects 78,146 megawatts of resources this summer with an anticipated reserve margin of 10.9 percent. That translates into a deficit of 2,000 megawatts based on a target margin of 13.75 percent. The PJM Interconnection LLC and Southwest Power Pool regions have the highest anticipated reserve margins, exceeding 32 percent compared to their target levels of 13.1 percent and 12 percent, respectively. In May, the Texas grid operator said it expects tighter reserves on peak summer days driven by the growing economy and generation retirements.

Utility Group Seeks Measures to Prevent Above-Market Prices in Reforms to 40-Year Old Power Purchase Rules

The Edison Electric Institute called for a holistic review of the Public Utility Regulatory Policies Act of 1978 or PURPA to ensure consistency with today’s electric markets, according to a June 25 filing with the Federal Energy Regulatory Commission. PURPA encourages a market for non-utility generators by requiring utilities to purchase power from small independent electricity generators at the “avoided cost,” or the cost the utility would spend to generate the electricity itself. The institute said it seeks reforms to align the rules with the current energy landscape rather than altering the must-buy obligation. EEI noted that energy market changes have led to “uneven, unplanned, and uneconomic” development and that subsidies are favoring PURPA-qualifying facilities to the detriment of customers and competitive resources. The institute said that states should have more freedom to establish avoided cost at market cost to prevent extra costs being passed on to customers. As wholesale prices remain far below those under fixed long-term PURPA contracts and the growth in renewables portends further declines in energy prices, the institute said avoided costs should not lock in prices that may be above market prices in the future.

Idaho Regulator Seeks Input on Whether Solar Rate Class Should Exclude Customer-Generators That Don’t Export to Grid

The Idaho Public Utilities Commission agreed to reconsider a petition by solar energy advocate Vote Solar asking the commission to specify that the new rate classes for Idaho Power Company’s on-site generation customers does not apply to customers who use self-generation to purely offset their usage and don’t export to the grid, according to a June 28 order. The commission staff filed a response saying that those who are “incapable of exporting to the grid” should be exempt, meaning that the new classes apply only to those who don’t use devices such as “grid tie limiter or grid inverter with export control” that prevent grid export. Idaho Power said that energy exports cannot be used as a qualification criteria because a system connected in parallel to the utility’s system receives voltage from the system and is capable of export. The utility argued that customer-configurable devices can be reconfigured to allow export. The commission will accept briefs until Aug. 10 discussing whether the ability to export should be used to decide customer generators’ inclusion in the rate classes. Idaho Power is a subsidiary of IDACORP Inc.

Pennsylvania Enacts Legislation Allowing Diverse Rate Designs to Expand Revenue Options For Utilities

Pennsylvania Governor Tom Wolf, a Democrat, signed legislation on June 28 that authorizes the state Public Utility Commission to allow a range of rate designs including revenue decoupling, performance-based rates, formula rates, and multi-year rate plans. The bill seeks to take advantage of innovations in utility operations and information technology to benefit consumers. The commission issued a proposal in May asking utilities to explore alternative ratemaking methods. (HB 1782)

Pennsylvania Retail Supplier Files Settlement to Resolve Allegations of Slamming Electric Customers

Astral Energy LLC, a certified electric supplier within FirstEnergy Pennsylvania Companies’ service territories, agreed to a civil penalty of $6,000 to resolve allegations of slamming stemming from erroneous enrollment of customers whose account numbers were provided for electronic data testing, according to a settlement filed with the Pennsylvania Public Utilities Commission on June 25. The issue stems from FirstEnergy’s notification to the commission of customer complaints that Astral switched their supplier without proper authorization in October 2015. Astral found that its third-party vendors mistakenly submitted the numbers for enrollment to FirstEnergy’s live system after completing the testing, unaware that they were live account numbers, but rescinded the enrollments after it discovered the mistake. Under the commission’s regulations, licensees are held responsible for conduct of third-party vendors. The settlement includes operational procedures by Astral to prevent transmission of erroneous or improper enrollment data to the distribution company.

New England Energy Demand Dropped to 18-Year Low Amid Higher Energy Efficiency, Solar: Market Monitor Report

Power consumption on ISO-New England Inc.’s six-state market fell to its lowest level in 18 years, thanks to energy efficiency and, to a lesser extent, behind-the-meter solar, according to the ISO Internal Market Monitor’s 2017 market performance report released on June 22. The report recommended changes to improve performance including market reforms that complement the pay-for-performance structure to ensure fuel security during winter and removing the performance-payment eligibility for generators subject to the minimum offer price rule.

Modernizing the Grid

Direct Current Lines Can Solve Operational Issues of Renewable Generation: EIA

The benefits of high-voltage direct current, or HVDC lines, which are not yet widely deployed in the electric transmission network, can help address the operational challenges of renewable generation, according to a June 28 report from the U.S. Energy Information Administration. Fluctuations in solar and wind generation create the need for more grid services to balance supply and demand, and the best wind resources happen to be located far from demand centers. The agency said that the attributes of HVDC such as cost-effectiveness over long-distance applications, lower power losses, suitability for underwater lines, and overload-handling capability that prevents cascading failures can benefit renewables integration. HVDC projects have an estimated per-mile cost of $1.17 million to $8.62 million with convertor station costs accounting for up to 60 percent of the total fixed costs.

New York Begins Study of Energy Storage to Achieve 33 Percent Cost Cuts, Knock Down Barriers to Adoption

The New York State Energy Research and Development Authority announced an evaluation plan on June 27 to develop an estimate of the major cost components of energy storage to inform its program strategy. The plan includes outreach activity to collect and update data about distributed storage installation with an emphasis on soft costs, as well as a broad review to assess hardware costs, hardware balance-of-system costs, and performance. The study is intended to achieve select goals to improve energy storage economics and performance for key applications including making intermittent renewables “always deployable” and providing ancillary services during peak demand hours. The agency also seeks to achieve meaningful reductions in soft costs of distributed storage with a goal of 33 percent by 2021 relative to a 2015-2016 baseline, identify “best fit customers” and use storage in utility planning. The agency will collaborate with Navigant Consulting Inc., which has completed evaluations for the agency for over a decade including the agency’s energy efficiency programs.

Fuels and Pipelines

U.S. EPA Proposes Higher Renewable Fuel Blending Volumes, Draws Criticism For Failing to Address Retroactive Waivers

The U.S. Environmental Protection Agency on June 26 proposed to set a blending level of 19.88 billion gallons for 2019 under the Renewable Fuel Standard, about 3 percent higher than this year’s levels. The program, established in 2007, directs the agency to set annually increasing blending mandates for renewable fuel use in the transportation sector to reach 36 billion gallons by 2022. The proposal would keep the target for conventional biofuel, mainly corn-based ethanol, at 15 billion gallons, raising questions about reallocating ethanol volumes exempted for refineries. The National Corn Growers Association said that the continued retroactive exemptions to refineries undermines the volumes “rendering the blending levels meaningless.” Pointing to the 1.6 billion gallons that was retroactively waived from the 2016 and 2017 requirements, the association said that those gallons should be reallocated so that blending obligations are kept. The American Petroleum Institute said the agency was right in not reallocating waived volumes, but reiterated that the program is flawed and needs reforms to reflect the “strong domestic production” in the current energy market. It warned that consumers would be impacted by the increasing volumes that threaten to hit the blend wall – the point at which ethanol blending would exceed the 10 percent limit acceptable for vehicles. The agency has until Nov. 30 to issue final biofuel targets for the upcoming year.

National Grid's Fields Point LNG Plant in Rhode Island Clears U.S. Review

The Federal Energy Regulatory Commission found that the Fields Point Liquefaction Project proposed by National Grid LNG LLC will not have significant impacts on the environment with the agency’s recommended mitigation measures, according to an environmental assessment issued on June 25. The project would add a new natural gas liquefaction unit within the existing Fields Point Facility used for peak-shaving to ensure gas availability during winter. The firm capability of the proposed project is subscribed under precedent agreements with National Grid’s affiliate storage customers, The Narragansett Electric Company and Boston Gas Company, which currently rely solely on an import terminal in Everett, Massachusetts. National Grid LNG is a subsidiary of National Grid plc.

Municipal Coalition Launches Court Challenge Against Texas Regulator For Permitting Cost Recovery of AEP’s Retired Coal Plant

Cities Advocating Reasonable Deregulation, a coalition of municipalities, asked the District Court of Travis County, Texas to review the Texas Public Utility Commission’s order issued in March permitting Southwestern Electric Power Company to recover costs of its investment its Welsh Unit 2 generating unit even though it has been closed, according to a June 25 notice. The coalition pointed that the utility voluntarily closed the 528-megawatt unit of the coal-fueled Welsh power plant in 2016 despite having 22 years of expected life remaining and the commission found that it is longer useful in providing service. It argued that any depreciation expense related to the facility are not to be considered as reasonable and necessary operating expenses and that the commission wrongly included the expenses in setting the utility’s rates. The coalition’s members have jurisdiction over the utility’s rates and services in their city limits. Southwestern Electric, which serves retail and wholesale customers in Texas, Louisiana, and Arkansas, is a subsidiary of American Electric Power Company.

Energy Secretary Praises U.S. Innovation at World Gas Conference

U.S. Energy Secretary Rick Perry touted the spectacular transformation in the energy landscape that led the U.S. to become the world’s number-one natural gas producer, in a keynote speech at the 27th World Gas Conference held in the U.S. after 30 years. Perry narrated the development of advanced drill bits and horizontal drilling that revolutionized the natural gas industry stressing that the “spirit of innovation” has helped drive progress in many ways including growth in renewables, next generation nuclear energy, and drastic emissions reductions. Perry believes there is still “stubborn opposition” to fossil fuels but said that the Trump administration strives to reduce emissions by innovation rather than punish fuels that produce emissions. The World Gas Conference is a triennial event held since 1931 by the International Gas Union. The 2018 conference held from June 25-29 gathered policy makers and industry leaders from across the globe to discuss the role of natural gas as an important source of “clean, abundant, economical, and sustainable” energy.

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